HTC is having second thoughts about its decision to purchase S3 Graphics now that the U.S. International Trade Commission has dismissed S3's patent infringement complaint against Apple.

The Taiwanese handset maker said in a statement on Wednesday that it will conduct a "holistic re-evaluation of the S3 Graphics acquisition" in light of the case dismissal, Paid Content reports. HTC also said it was "disappointed at the outcome" of the recent ITC ruling.

The ITC formally dismissed S3's complaint on Monday, overturning a July ruling that had found Apple's Mac products had infringed on the graphics firm's patents.

HTC acquired S3 earlier this year for $300 million in hopes of gaining a valuable bargaining chip in its ongoing dispute with Apple. Chief Executive Peter Chou has since worked to reassure investors that the value of the S3 Graphics purchase will exceed its high price.

S3 Graphics intends to appeal the decision. It also filed a second complaint against Apple with the ITC in September, alleging infringement of two more of its patents.

But, time is running out for HTC to strike a deal with its rival, as the ITC is scheduled to rule on Apple's case against HTC on Dec. 6. In July, an Administrative Law Judge with the commission found HTC guilty of infringing on two of Apple's patents.

Apple first sued HTC in March 2010, accusing the company of stealing its technology. According to his authorized biography, Steve Jobs was livid at the release of an HTC phone in January 2010 that appeared to infringe Apple's iPhone patents.

"I will spend my last dying breath if I need to, and I will spend every penny of Apple's $40 billion in the bank, to right this wrong," Jobs reportedly told biographer Walter Isaacson. "I'm going to destroy Android, because it's a stolen product. I'm willing to go thermonuclear war on this."

HTC spooked investors on Thursday when it slashed its revenue forecast, predicting zero growth year over year for the fourth quarter, down from original estimates of 20 percent to 30 percent growth. The company's shares fell as much as 7 percent on the news.

"This new guidance takes us by complete surprise and is at odds with recent discussions we have had with distribution channels, especially in Europe," Sanford C. Bernstein senior analyst Pierre Ferragu told Reuters.

HTC's full statement is reproduced below:
HTC is disappointed at the outcome of the recent ITC ruling that stated Apple did not infringe S3 Graphics patents. S3 Graphics will continue to appeal. HTC has made significant effort in preparing for these complicated legal proceedings, including a complete legal investigation and comprehensive report on patent and price evaluations. HTC had decided to acquire S3 Graphics based on the strong belief that evidences of patent infringement from Apple were clear and ITC ruled in its initial determination that Apple had infringed two patents from S3. In light of recent development, HTC will work closely in good faith with VIA Technologies and WTI Investment International to conduct [a] holistic re-evaluation of the S3 Graphics acquisition.

HTC had decided to acquire S3 Graphics based on the strong belief that evidences of patent infringement from Apple were clear and ITC ruled in its initial determination that Apple had infringed two patents from S3.

So HTC didn't purchase S3 because they made good products and they would enhance HTC's own products?
They only purchased based on the belief they could screw Apple?

So to sum up:
They tried to buy a legal victory because they don't have any real innovation to stand on, got called on their bluff, and are running away with their tails between their legs.

The problem for Htc is Apple has patents that were granted long before Htc even existed.

No new company can enter the smartphone market and even attempt to innovate because companies like Microsoft, Apple and IBM own patents fundamental to all operating systems. The only way is to have your own portfolio of patents and cross license which rules out most new companies. The patent system is broken and it stops innovation.

Cost them $300 million to buy S3 and untold millions more for a legal defense, yet they only took in 624.62 million in profit last quarter, that was a new record for them. There stock has dropped by what looks about 1/3 in the last week or two.

This bot has been removed from circulation due to a malfunctioning morality chip.

Cost them $300 million to buy S3 and untold millions more for a legal defense, yet they only took in 624.62 million in profit last quarter, that was a new record for them. There stock has dropped by what looks about 1/3 in the last week or two.

Didn't help with them also sponsoring cycling team etc. there are other ways to market product without spending huge sums of money. Check out Apple. Fanboies everywhere to defend and market products not to mention media hypes that generate interests.

The problem for Htc is Apple has patents that were granted long before Htc even existed.

No new company can enter the smartphone market and even attempt to innovate because companies like Microsoft, Apple and IBM own patents fundamental to all operating systems. The only way is to have your own portfolio of patents and cross license which rules out most new companies. The patent system is broken and it stops innovation.

HTC innovates?
HTC builds some of the most generic hardware you can imagine.
The patent system stops leeches like HTC from stealing their way in.

The problem for Htc is Apple has patents that were granted long before Htc even existed.

No new company can enter the smartphone market and even attempt to innovate because companies like Microsoft, Apple and IBM own patents fundamental to all operating systems. The only way is to have your own portfolio of patents and cross license which rules out most new companies. The patent system is broken and it stops innovation.

Stop making shit up, it just makes you look silly. A few examples to prove that your talking out of your arse. FreeBSD, Solaris, WebOS, MeeGo, Symbian OS, QNX, VxWorks, Tru64, FreeVMS and PalmOS, thats 10 examples. Here is another one, brickOS, heard of it? It made by LEGO, thats right even LEGO can make a f*cking OS without getting sued. HTC has no excuse!

No new company can enter the smartphone market and even attempt to innovate because companies like Microsoft, Apple and IBM own patents fundamental to all operating systems. The only way is to have your own portfolio of patents and cross license which rules out most new companies. The patent system is broken and it stops innovation.

Read what you said very closely, as it doesn't make sense.

The whole point of patents is to protect the innovations of individuals and companies. That could be an idea you or me make, or an idea that a large company makes. It stops competitors using our innovation for their own gain.

The second issue is that far from preventing innovation - because copying others is not innovation - it promotes innovation because companies (and individuals) have to find new ways of doing things.

So far from Apples Slide patent being restrictive, it actually makes companies think "how can we unlock a screen differently". And when they work that out, they'll get a patent for it.

Copying other peoples "innovations" and getting hauled into court for it is neither innovative, nor a broken system. It merely means that someone thought of it first.

The problem for Htc is Apple has patents that were granted long before Htc even existed.

No new company can enter the smartphone market and even attempt to innovate because companies like Microsoft, Apple and IBM own patents fundamental to all operating systems. The only way is to have your own portfolio of patents and cross license which rules out most new companies. The patent system is broken and it stops innovation.

As InsideOut said, that's wrong.

You can license an existing OS or create one from scratch. But creating one from scratch means you can't copy features, ideas or objects from another. It has to be new and unique, especially if you want to play with the big boys.

The whole point of patents is to protect the innovations of individuals and companies. That could be an idea you or me make, or an idea that a large company makes. It stops competitors using our innovation for their own gain.

The second issue is that far from preventing innovation - because copying others is not innovation - it promotes innovation because companies (and individuals) have to find new ways of doing things.

So far from Apples Slide patent being restrictive, it actually makes companies think "how can we unlock a screen differently". And when they work that out, they'll get a patent for it.

Copying other peoples "innovations" and getting hauled into court for it is neither innovative, nor a broken system. It merely means that someone thought of it first.

The biggest issues arise when old patents, particularly old and overly broad ones, are used to assert claims against recent technologies or creations. Take a look at some of the patents that MS is using to bully Android licensees. Some date to the beginning of the '90's, while others (still old) have nothing at all to do with current uses. That's most of the reason they're trying to hide what the claims are until they get NDA's prior to negotiating the payment.

Ideas and innovation would flourish more if the patent system required a more narrow assertion so that current "inventions" aren't claimed to be copies of something that the holder of a 20-year old patent would never have considered to begin with.

HTC is having second thoughts about its decision to purchase S3 Graphics now that the U.S. International Trade Commission has dismissed S3's patent infringement complaint against Apple...

Just because no one is mentioning it ...

It wasn't really a "purchase" in the normal sense anyway.

S3 is owned by VIA and both VIA and HTC are owned by the same family. This is a shuffling of ownership of the S3 patents from one corporation owned by the brother, to another owned by the sister. Now they will shuffle back.

They will undoubtedly lose money but it's just the price they pay for the financial separation they built in, between the two companies. It's all just on paper anyway. Nothing actually happened in the real world.

The problem for Htc is Apple has patents that were granted long before Htc even existed.

No new company can enter the smartphone market and even attempt to innovate because companies like Microsoft, Apple and IBM own patents fundamental to all operating systems. The only way is to have your own portfolio of patents and cross license which rules out most new companies. The patent system is broken and it stops innovation.

The empirical evidence suggests that your conclusion is wrong.
The patent system protects the ability of people who invest significant resources in developing new technologies to be able to recover a profit on their investment. Without the patent system, people who do not have an invested stake in creating a new technology would simply copy the work of those who made the investment and undercut the sales of the original company since they do not need to recover the costs of the development investment in their pricing. While potentially beneficial to consumers in the initial round in terms of pricing, it's pretty obvious that very soon nobody would invest effort in developing new technology and in the long run everyone loses.

The record of massive technological advancement that has occurred since the implementation of the patent system proves that this is the case. It is possible that the system may need some fine tuning given some of the silly patents that have been granted that should have fallen under the definition of "obvious", overall patents are a very good thing.

In this specific case, HTC have been caught being dirt bags. Good riddance.

The whole point of patents is to protect the innovations of individuals and companies. That could be an idea you or me make, or an idea that a large company makes. It stops competitors using our innovation for their own gain.

The second issue is that far from preventing innovation - because copying others is not innovation - it promotes innovation because companies (and individuals) have to find new ways of doing things.

So far from Apples Slide patent being restrictive, it actually makes companies think "how can we unlock a screen differently". And when they work that out, they'll get a patent for it.

Copying other peoples "innovations" and getting hauled into court for it is neither innovative, nor a broken system. It merely means that someone thought of it first.

Thanks for this.

It's become somewhat of a tired meme on tech sites for everyone to assert how "obvious" it is that the patent system is "totally broken" but no one can ever elucidate why. The reason is (IMO of course) that it isn't really broken at all. Assuming the patents granted, are properly granted there is no such thing as an "overly broad" earlier patent that could act as a landmine for later innovation.

The copyright system is hopelessly and irretrievably broken. The patent system is not.

It's not perfect, it could use a bit of work, but it actually functions pretty much as it was designed to.

You can license an existing OS or create one from scratch. But creating one from scratch means you can't copy features, ideas or objects from another. It has to be new and unique, especially if you want to play with the big boys.

It is virtually impossible to create a new OS from scratch with infringing on existing patents. There are just to many patents involved. If Apple was a new company without years worth of patents to cross license, in all likelihood it could not have created iOS without having to pay a fortune to Microsoft.

Who has the best product is irrelevant, the system favors which company is the oldest and has the largest patent portfolio.

The problem for Htc is Apple has patents that were granted long before Htc even existed.

So just because you start a new company, you shouldn't have to worry about existing patents? That would make penalty-free infringement awfully easy. All I'd need to do to steal somebody's idea is start a new business and they wouldn't be able to touch me.

Quote:

No new company can enter the smartphone market and even attempt to innovate because companies like Microsoft, Apple and IBM own patents fundamental to all operating systems. The only way is to have your own portfolio of patents and cross license which rules out most new companies. The patent system is broken and it stops innovation.

If the patent system didn't exist, why should I innovate anything? Without protection, any new and brilliant idea I come up with could be copied by others with impunity. There'd be nothing in it for me.

Hey, I've got an idea. Let's bundle patents together and sell them as shares. Then we can sell insurance on them in case they end up worthless, and sell shares in the insurance. Money for nothing and chicks for free.

As I've said for a while, it looks like Samsung is going to wind up the Android manufacturer of record, along with some white box Chinese assemblers who can sell for next to nothing.

There's just not enough money to go around in that market. SE doesn't make any money, LG doesn't make any money, Motorola Mobility has managed to eke out a few break-even quarters but will either be absorbed by Google (and become the source of a few flagship models that don't materially effect allover sales) or remain independent by court order and continue to flounder.

HTC was the one other Android handset maker with consistent (if modest) profits, and it sounds like they aren't expecting to do that well in the future. At some point some of these players begin to drop out of the market-- you can't throw money in a hole forever. I see Samsung continuing to consolidate their position as Google's hardware partner, with most everything else being Kindle type forking or low performing super cheap stuff.

Samsung is sort of a wild card, however, since their recent success appears to have driven them mad. I think they think they're the heir apparent to Apple because they can put Android on well specced phones. They might try an end run around Google once they feel like they're safely in charge.

They spoke of the sayings and doings of their commander, the grand duke, and told stories of his kindness and irascibility.

If the patent system didn't exist, why should I innovate anything? Without protection, any new and brilliant idea I come up with could be copied by others with impunity. There'd be nothing in it for me.

Because the best way to sell more items is to continually create new and better products. Keep innovating and you stay ahead of the competition.

The real question is why should I innovate anything with the current system? If I come up with some new and brilliant product a big competitor with a huge arsenal of patents or worse a pure patent troll is going to come along with their hand out.